1. Umesh Dalal, CPA, CIA, CIG City Auditor Richmond, VA
Best Practices for Navigating the Intersection of Audit and Investigation
Umesh Dalal, CPA, CIA, CIG
City Auditor
Richmond, VA
Jason Hadavi, CPA, CFE
Chief of Investigations
Austin, TX

2. Objectives
What are the key advantages of having audit and investigation functions in one office?
What are the key strategies for working with internal or external investigative entities?

3. Audit/Investigation Intersection

4. Common Goals Dual Support:
Improved Accountability and Transparency
Improved Ethical and Control Environment
Dual Support:
Referrals and Information to/from both parties

5. Best Practices Respect each other’s area of responsibility
Admission seeking interviews, control recommendations, etc
Communicate early and often
Notification of red flags, not confirmed fraud

6. Best Practices Leverage the other’s expertise/experiences
Prior audits or investigations
Experiences with key personnel
Investigator skepticism
Auditor control knowledge

7. Why Does In House Work Better Than External?
Communication & Cooperation
Understanding of Each Role
Process Development
Consistency in approach/practices
OTJ Cross-Training

8. Case Studies #1 – Respecting Boundaries
#2 – Successful Investigation to Audit Conversion
#3 – Supporting Criminal Prosecution Backfires

9. Case Study #1
Non-Profit City Grant Recipient under audit by State Office
Auditors identify Accounts Payable Red Flags:
Multiple even payments to a single vendor
Unusually large amounts

10. Case Study #1 Auditors determine vendor is a DBA and confront suspect
Suspect destroys documents and flies to Venezuela
Prosecutors later convince suspect to return…convict on theft exceeding $800,0000

11. Case Study #2 CAIU Allegation - EMS Inventory Theft Vague Information
Preliminary Inquiry Did Not Yield Predication

12. Case Study #2 Referred matter to Audit Services
Audit Initiated – Identified lack of adequate controls (except for narcotics)
Even if fraud was occurring, records would not detail it

13. Case Study #3 Investigation of Convention Center Director
Allegations include falsification and financial mismanagement
Cooperative investigation between Auditor’s Office, Police, and DA

14. Case Study #3 All parties signed Grand Jury Confidentiality Agreements
After 9 months of investigation, suspect convicted on multiple counts of falsification

15. Additional Considerations
Criminality of potential findings
Local & State Laws affecting prosecution
Civil Service Implications